May 19, 2020
Pandemic effects showing in price spreads in meat supply chain
By Mary Hightower
U of A System Division of Agriculture
- Gaps widening between prices to farmers, and wholesalers to retail
- Find full analysis at https://bit.ly/AR-Ag-Eco-Impacts2020
FAYETTEVILLE, Ark. — The meat sector is feeling an accordion effect. Squeezed by panic buying and supply chain disruptions, record gaps are forming between pricing at the farm and wholesale levels, according to an analysis done by John Anderson, economist for the University of Arkansas System Division of Agriculture.
Anderson is head of the agricultural economics and agribusiness department, with a joint appointment in the Dale Bumpers College of Agriculture, Food and Life Sciences. His analysis is based on data from the U.S. Department of Agriculture’s Economic Research Service.
He said the effects of April’s meat processing disruptions are apparent in the ERS data on the difference between the wholesale value of meat versus its farm-level net value. The loss in processing meant cattle intended for slaughter were beginning to back up on the farms.
“ERS reports an April farm-to-wholesale price spread of 165.1 cents/pound – or about 41 percent of a carcass’ wholesale value of 402 cents/pound,” Anderson said. “That is a record wide spread between farm and wholesale values and clearly demonstrates the unprecedented market consequences of the sharp loss in slaughter/processing capacity in the sector in April.”
Pork also saw increases, but they were not as dramatic as they were in beef.
“The farm-to-wholesale spread in pork also increased modestly in April to 59.9 cents/pound, or 49 percent of the wholesale value of 121.6 cents/pound,” Anderson said. “This is a relatively wide spread seasonally, but it is not unprecedented.”
Poultry moved upward at the retail level, but not as much as might be expected given the disruptions in processing.
“Supply only describes one side of the market,” he said.
“It is a bit surprising that the biggest month-over-month percentage increase in retail price was observed in chicken,” which rose 5 percent from the previous month, Anderson said. “With falling consumer incomes and heightened perceptions of risk, consumers are likely favoring lower-priced product.
“With most food being prepared and consumed at home now, the greater availability of ready-to-eat and/or convenience products from chicken may also be influencing consumer demand,” he said.
To read more of Anderson’s analysis on COVID and consumer spending, see this and other economic impact reports at https://bit.ly/AR-Ag-Eco-Impacts2020.
About the Division of Agriculture
The University of Arkansas System Division of Agriculture’s mission is to strengthen agriculture, communities, and families by connecting trusted research to the adoption of best practices. Through the Agricultural Experiment Station and the Cooperative Extension Service, the Division of Agriculture conducts research and extension work within the nation’s historic land grant education system.
The Division of Agriculture is one of 20 entities within the University of Arkansas System. It has offices in all 75 counties in Arkansas and faculty on five system campuses.
The University of Arkansas System Division of Agriculture offers all its Extension and Research programs and services without regard to race, color, sex, gender identity, sexual orientation, national origin, religion, age, disability, marital or veteran status, genetic information, or any other legally protected status, and is an Affirmative Action/Equal Opportunity Employer.
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Media Contact: Mary Hightower
Chief Communications Officer
University of Arkansas System Division of Agriculture